Thursday, February 14, 2008

Government Regulation Gone Amuck, Three More Examples in One Day: No. 5 is Banking

5. Banking. The banking industry is "shopping proposals to Congress" so as to shift risk and eventual losses from bad loans to taxpayers.

In this WSJ article by Damian Paletta, we learn that banks are turning to the federal government, i.e. us as taxpayers, to bail them out of their mistakes. Credit Suisse and J.P. Morgan Chase are both proposing that the government step into this mess and save their butts.

And of course the bonuses their "mistakes" incurred have already been paid, nonrefundable.

They are worried, among other things, that in trying to help homeowners by writing off a portion of subprime loans, "they [the banks] might be sued by investors who hold mortgage-backed securities [i.e. the creditors who actually hold the debt]. However, if the industry came forward with a standard backed by the Treasury Department, the legal concerns would likely fade."

In other words, when you're about to break your contracted word and you're scared of the repercussions, look for a big thug with a gun.

[Thanks to hitman2.com for the image.]

The second thing they want the government to do is to guarantee the bad loans with taxpayer money. Do you and I really want to pay up when some homeowner who (knowingly or unknowingly) got in over his head decides to walk away from his house?

If you ask me, forcing us innocent bystanders to pay for the bad bets of investors, bankers, mortgage brokers and naive or greedy homeowners, is tantamount to embezzlement, racketeering, and tutti quanti.

Wake up, people. Your representatives in the legislator are about to steal your money, and they don't even have to put a gun to your head.

BEST GREETING CARDS on the web by Jacquie Lawson

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About Me

I maintain that a sense of humor comes right after air, water, food and shelter in the list of essentials for human thriving.
As to the inspiration for the title of this blog, there are two. First, read about economics' multiple personality disorder in my 7/2/05 post. Second, I like the story of 16-year-old Sybil Ludington who lived back in colonial America. Late at night on a rainy April 26, 1777, word came to the house of her father, a colonel in the militia, that the British were attacking and burning a local village. To stir the militiamen to battle, she jumped on her horse Star and rode for dozens of miles over unlit muddy forest tracks, not far from British troops, banging with a stick on every homestead door. This blog is my stick and my Star, carrying a bit of humor and lucidity into the dry, murky and pretentious cacophony of economics. (See my original posts for more.)